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way, profits of a corporation are taxed twice—once when earned bythe corporation and again when shareholders receive their portion ofthe profit.Corporations, especially larger ones, must also face extensive governmentregulation. Part of that regulation involves the actual formationof the corporation. The incorporation process must be followedexactly if the founders are to avoid legal difficulties, as outlined later inthis chapter. Another disadvantage is that the original founders of thecorporation can lose not only the control, but also the actual ownershipof the corporation. Because of the prominence of some corporations,business decisions by their directors and officers are often subject toclose scrutiny.Types of CorporationsCorporations may be classified as public or private corporations,stock or nonstock corporations, and domestic or foreign corporations(see Figure 28.1). Public corporations include incorporated politicalunits, such as towns, villages, cities, and school districts. Private corporationsmay be classified as profit or nonprofit corporations. Profitcorporations, private corporations organized for the purpose of makingmoney, are found in nearly every major field of economic activity,Although theshareholders of acorporation are theactual owners, they arenot agents of thecorporation. As a result,shareholders cannotcommit the corporationto any contractualarrangements.Figure 28.1PublicTypes of CorporationsPrivateIncorporatedPolitical UnitsStates, cities, towns,counties, townships,school districts,water districtsDomestic: incorporated in the stateForeign: incorporated in another stateAlien: incorporated in another countryFor-Profit(Stock Corporations)BusinessNonprofit(Nonstock Corporations)ReligiousEducationalSocialCharitableTYPES OF CORPORATIONSThere are many different types of corporations,and each has a generally accepted label. In youropinion, which of these corporate forms is themost effective?Chapter 28: Forming and Financing a Corporation 607